# Open economy with sticky wages - steadystate file did not compute the steady state

**URL:** <https://forum.dynare.org/t/open-economy-with-sticky-wages-steadystate-file-did-not-compute-the-steady-state/21002>\
**Category:** Steady state\
**Created:** [1 September 2022 06:24 UTC](https://forum.dynare.org/t/open-economy-with-sticky-wages-steadystate-file-did-not-compute-the-steady-state/21002 "2022-09-01T06:24:53Z")\
**Posts on this page:** 3\
**Page:** 1

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**Author:** ![Zulen](https://forum.dynare.org/letter_avatar_proxy/v4/letter/z/85f322/32.png) [@Zulen](https://forum.dynare.org/u/Zulen)\
**Post date:** [1 September 2022 06:24 UTC](https://forum.dynare.org/t/open-economy-with-sticky-wages-steadystate-file-did-not-compute-the-steady-state/21002/1 "2022-09-01T06:24:53Z")

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Hi, Im having problems computing the model. I used the nonlinear version of the small open economy, to which i added the equations corresponding to the sticky wage setup. When i compute the file matlabs sends this message: “The steadystate file did not compute the steady state”. The following equations seem to be the problem but i alredy checked the algebra beehind.

Equation number 26 : -0.0051916 : Recursive wage inflation  
Equation number 29 : -0.25 : Wage dispersion

Am I missing something?

[soe.mod](https://forum.dynare.org/uploads/short-url/zu8QPhuNgqEQxYnBTf0vPQuawhN.mod) (10.4 KB)

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<div class="post-metadata">

**Author:** ![Zulen](https://forum.dynare.org/letter_avatar_proxy/v4/letter/z/85f322/32.png) [@Zulen](https://forum.dynare.org/u/Zulen)\
**Post date:** [1 September 2022 06:25 UTC](https://forum.dynare.org/t/open-economy-with-sticky-wages-steadystate-file-did-not-compute-the-steady-state/21002/2 "2022-09-01T06:25:50Z")

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This is the Small open economy file i used as a baseline:

[Gali\_2015\_chapter\_8\_nonlinear.mod](https://forum.dynare.org/uploads/short-url/tqjej4gmaWHjKs714KYfQRov2m3.mod) (9.7 KB)

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<div class="post-metadata">

**Author:** ![jpfeifer](https://forum.dynare.org/user_avatar/forum.dynare.org/jpfeifer/32/5044_2.png) [@jpfeifer](https://forum.dynare.org/u/jpfeifer)\
**Post date:** [1 September 2022 08:30 UTC](https://forum.dynare.org/t/open-economy-with-sticky-wages-steadystate-file-did-not-compute-the-steady-state/21002/3 "2022-09-01T08:30:00Z")

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I think your implementation is incorrect? For example, you have

```auto
    S_w = (1-theta_w)*(W_opt/W_real)^(-epsilon_w*(1+varphi)) + ((W_real/W_real(-1))*Pi)^(epsilon_w*(1+varphi))*S_w(-1);

```

But in the first term, the reset nominal wage should be compared to the nominal wage. But the biggest issue is the steady state computation. The wage markup (the wedge between the wage and the MRS) must be reflected in the steady state computations.